Question 1

Which of the following is an example of a non-recurring fair value measurement?

Accepted Answer

A)  Inventory 
B)  Income taxes payable 
C)  Land held for sale 
D)  Current liabilities 
A)  Inventory 
B)  Income taxes payable 
C)  Land held for sale 
D)  Current liabilities C

Question 2

Market-corroborated inputs are examples of:

Accepted Answer

A)  Level 3 inputs on the fair value hierarchy 
B)  Level 1 inputs on the fair value hierarchy 
C)  Level 2 inputs on the fair value hierarchy 
D)  Items not included on the fair value hierarchy 
A)  Level 3 inputs on the fair value hierarchy 
B)  Level 1 inputs on the fair value hierarchy 
C)  Level 2 inputs on the fair value hierarchy 
D)  Items not included on the fair value hierarchy C

Question 3

What is used to assess fair value when there is insufficient evidence to reach a conclusion about whether a transaction is orderly?

Accepted Answer

A)  Transaction price 
B)  Future cash flows 
C)  Quoted stock prices 
D)  Volume of the transaction 
A)  Transaction price 
B)  Future cash flows 
C)  Quoted stock prices 
D)  Volume of the transaction A

Question 4

Which level of the fair value hierarchy can be utilised without any adjustments?

Accepted Answer

A)  All levels 
B)  Level 3 
C)  Level 1 
D)  Level 2 
A)  All levels 
B)  Level 3 
C)  Level 1 
D)  Level 2

Question 5

How may an exit price be determined?

Accepted Answer

A)  Direct observation 
B)  Estimation 
C)  Both A and B are correct 
D)  Neither A nor B is correct 
A)  Direct observation 
B)  Estimation 
C)  Both A and B are correct 
D)  Neither A nor B is correct

Question 6

What is likely to occur when a seller is in financial distress or is legally required to dispose of an asset or liability?

Accepted Answer

A)  The transaction will not be orderly 
B)  Marketing activities are hot adhered to 
C)  The transaction price can be confidently relied upon 
D)  The objective of fair value measurement changes 
A)  The transaction will not be orderly 
B)  Marketing activities are hot adhered to 
C)  The transaction price can be confidently relied upon 
D)  The objective of fair value measurement changes

Question 7

At which date must an entity have access to the principal or most advantageous market?

Accepted Answer

A)  Balance sheet date 
B)  Reporting date 
C)  Measurement date 
D)  The last date of the fiscal quarter 
A)  Balance sheet date 
B)  Reporting date 
C)  Measurement date 
D)  The last date of the fiscal quarter

Question 8

A wide bid-ask spread is indicative of

Accepted Answer

A)  An increase on market volume or activity 
B)  A decrease in market volume or activity 
C)  A Level 1 input in the fair value hierarchy 
D)  Highly developed price quotations 
A)  An increase on market volume or activity 
B)  A decrease in market volume or activity 
C)  A Level 1 input in the fair value hierarchy 
D)  Highly developed price quotations

Question 9

Which valuation technique uses internal rate of return and present value techniques to determine fair value?

Accepted Answer

A)  Cost approach 
B)  Time value approach 
C)  Market approach 
D)  Income approach 
A)  Cost approach 
B)  Time value approach 
C)  Market approach 
D)  Income approach

Question 10

What term describes the market with the greatest volume and level of activity for an asset or liability?

Accepted Answer

A)  Secondary market 
B)  Principal market 
C)  Stock market 
D)  International exchange 
A)  Secondary market 
B)  Principal market 
C)  Stock market 
D)  International exchange

Question 11

Which use of a non-financial asset is being considered when zoning regulations are applicable?

Accepted Answer

A)  Physically possible 
B)  Financially feasible 
C)  Fair value measurement 
D)  Legally permissible 
A)  Physically possible 
B)  Financially feasible 
C)  Fair value measurement 
D)  Legally permissible

Question 12

Which term describes the exit price of an asset at the measurement date?

Accepted Answer

A)  Replacement cost 
B)  Current cost 
C)  Fair value 
D)  Historical cost 
A)  Replacement cost 
B)  Current cost 
C)  Fair value 
D)  Historical cost

Question 13

Which type of cost may be adjusted when determining fair value?

Accepted Answer

A)  Transaction costs 
B)  Transport costs 
C)  Both A and B 
D)  Neither A nor B 
A)  Transaction costs 
B)  Transport costs 
C)  Both A and B 
D)  Neither A nor B

Question 14

Which valuation technique uses option pricing models to determine fair value?

Accepted Answer

A)  Income approach 
B)  Cost approach 
C)  Market approach 
D)  Asset approach 
A)  Income approach 
B)  Cost approach 
C)  Market approach 
D)  Asset approach

Question 15

What is the level at which an asset or a liability is aggregated or disaggregated for recognition purposes?

Accepted Answer

A)  Transaction 
B)  Unit of account 
C)  Balance Sheet 
D)  Corporate 
A)  Transaction 
B)  Unit of account 
C)  Balance Sheet 
D)  Corporate

Question 16

Which characteristic(s)must considered when measuring the fair value of an asset?

Accepted Answer

A)  Location of the asset 
B)  Physical condition of the asset 
C)  Both A and B 
D)  Neither A and B 
A)  Location of the asset 
B)  Physical condition of the asset 
C)  Both A and B 
D)  Neither A and B

Question 17

Which type of risk must be incorporated in determining the fair value of a liability?

Accepted Answer

A)  Market risk 
B)  Non-performance risk 
C)  Interest rate risk 
D)  Portfolio risk 
A)  Market risk 
B)  Non-performance risk 
C)  Interest rate risk 
D)  Portfolio risk

Question 18

List and give examples of the inputs of the fair value hierarchy.

Accepted Answer

Level 1 inputs are quoted prices (unadju

Question 19

Which of the following is not a key characteristic of the definition of fair value?

Accepted Answer

A)  The concept of an exit price 
B)  The characteristics of the transaction for the purpose of measuring value 
C)  The identification of the asset or liability that is being measured at fair value 
D)  The characteristics of the reporting entity 
A)  The concept of an exit price 
B)  The characteristics of the transaction for the purpose of measuring value 
C)  The identification of the asset or liability that is being measured at fair value 
D)  The characteristics of the reporting entity

Question 20

Which valuation technique considers replacement cost of an asset when determining fair value?

Accepted Answer

A)  Income approach 
B)  Cost approach 
C)  Market approach 
D)  Lower-of-cost-or-market approach 
A)  Income approach 
B)  Cost approach 
C)  Market approach 
D)  Lower-of-cost-or-market approach

Exam 4: Fair Value Measurement

Which of the following is an example of a non-recurring fair value measurement?

Market-corroborated inputs are examples of:

What is used to assess fair value when there is insufficient evidence to reach a conclusion about whether a transaction is orderly?

Which level of the fair value hierarchy can be utilised without any adjustments?

How may an exit price be determined?

What is likely to occur when a seller is in financial distress or is legally required to dispose of an asset or liability?

At which date must an entity have access to the principal or most advantageous market?

A wide bid-ask spread is indicative of

Which valuation technique uses internal rate of return and present value techniques to determine fair value?

What term describes the market with the greatest volume and level of activity for an asset or liability?

Which use of a non-financial asset is being considered when zoning regulations are applicable?

Which term describes the exit price of an asset at the measurement date?

Which type of cost may be adjusted when determining fair value?

Which valuation technique uses option pricing models to determine fair value?

What is the level at which an asset or a liability is aggregated or disaggregated for recognition purposes?

Which characteristic(s)must considered when measuring the fair value of an asset?

Which type of risk must be incorporated in determining the fair value of a liability?

List and give examples of the inputs of the fair value hierarchy.

Which of the following is not a key characteristic of the definition of fair value?

Which valuation technique considers replacement cost of an asset when determining fair value?

Institutional Arrangements for Setting Accounting Standards in Australia

The Conceptual Framework: Purpose, reporting Entity, the Objective of Financial Reporting, and Qualitative Characteristics

The Conceptual Framework: Definition, recognition and Measurement of the Elements in General Purpose Financial Statements

The Choice of Accounting Methods

The Statement of Financial Position

Accounting for Current Assets

Accounting for Property, plant and Equipment

Accounting for Company Income Tax

Accounting for Intangible Assets

Accounting for Leases

Accounting for Employee Benefits

Accounting for Financial Instruments

The Statement of Comprehensive Income

Revenue

The Statement of Cash Flows

Financial Reporting: Segment Reporting and Highlights Statements

Further Financial Reporting Issues

Accounting for Extractive Industry

Accounting for Agricultural Activity

Accounting for Superannuation Entities

Accounting for Insurance

International Accounting Standards, harmonisation and Convergence

Foreign Currency Translation

Accounting for Corporate

Ethics in Accounting

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